Networkers all share a piece of the victory
pie
By Ben Heskett
Staff Writer, CNET News.com
September 30, 1999, 4:00 a.m. PT
Behind the chest-pounding that dominates the competitive climate in today's network
equipment market lies a simple fact: Everybody wins.
Despite strategic blunders and product misfires, the largest network equipment firms--Cisco
Systems, Nortel Networks, and Lucent Technologies--can always count on playing some
type of role in network construction from the likes of Qwest Communications International,
Level 3 Communications, or US West, to name a few.
Network contracts are viewed as the epitome of success in the market. The more contracts a
company can grab, the stronger that company's strategy will appear to customers and to Wall
Street. Yet it's not a situation where one winner will take all.
For example, Qwest signs a deal with Cisco for network gear. The next week Nortel signs a
deal with the same firm. Confused? "They're probably all in different portions of the
network," said Rolf De Vegt, principal analyst with industry consultants Renaissance
Worldwide. "They can all be true."
As a result, networking firms find themselves in the midst of a high-pitched struggle for
business in a world in which every network operator knows that every company has its own
particular technological strengths.
"None of the major market players are winning
everything," said Chris Nicoll, director of infrastructure
analysis for market watcher Current Analysis.
In the United States alone, communications companies
will spend $32.5 billion on equipment for their networks
this year, Renaissance predicts, with the market expected
to grow by 11 percent each year. These numbers don't
even take into account the corporate networking market,
according to the research firm.
X marks the spot
Case in point: Nortel this week unveiled its latest
high-speed networking equipment gear. As part of the
announcement, the company was quick to highlight both
Cable & Wireless and IXC Communications as adopters
of its new technology.
Curiously, IXC has already been certified as a
"Cisco-powered network," a designation that means at
least 80 percent of its network equipment comes from the
data networking giant. So what gives?
It's a typical scenario. IXC uses Cisco equipment to power the Internet Protocol (IP)-based
portion of its network for Net services. Separately, the firm uses networking gear from
Newbridge Networks and Ciena for connections based on sophisticated frame relay and
asynchronous transfer mode (ATM) technology. Finally, IXC taps Nortel's fiber-optic
expertise for long-haul transport of voice and data traffic.
In doing so, IXC doesn't want to become too dependent on one provider. Picking and
choosing networking firms allows companies to potentially use other companies as leverage
during contract negotiations, according to analysts.
"These relationships--to work--are long-term relationships. They start with a product, but
they have to do a lot more than that," said Mike Guess, vice president of engineering for IXC.
"I think service providers are hedging their bets," Current Analysis' Nicoll said. "I think they
recognize each company's particular strengths. It gives the service provider a hammer to hold
over its vendors."
Losses and gains
Earlier this month, Swedish communications carrier Telia was in the middle of a fight between
Cisco and Nortel over conflicting reports concerning equipment the service provider was
adopting in its network.
Telia, regarded as a cutting-edge communications company, signed a deal with Cisco in
February to expand its network. Earlier this month, Nortel--which has a 10-year relationship
with Telia--detailed a similar expansion agreement with the company, calling it a significant
Internet win.
But Cisco remains the supplier for Telia's IP-based networking needs, according to the
company. At issue is Cisco's attempt to extend use of its equipment to a portion of the
network based on frame relay and ATM. "They were looking at one of our ATM products,"
said Larry Lang, vice president of service provider marketing at Cisco.
"One of the things that may lead to confusion is there's a lot of technology that goes into
these networks," Lang said. "In the real world, these networks are complicated beasts."
But Nortel executives said the deal was a "displacement of another manufacturer's
equipment," according to Paul Brandwood, a marketing director for Nortel's carrier data
solutions group. "It's a significant win," he said.
Telia eventually clarified its position after different executives gave diverging
accounts of the company's equipment plans. "We will continue to work with Cisco as
network operations are more and more driven toward data," Jan Morten Ruud, head of
datacom and Internet operations for Telia, recently told Bloomberg.
"The vendors want to position themselves as the leader in the market. In fact, they're
all leaders," noted Current Analysis' Nicoll. "No one's going to dominate all the
markets together."
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